In the realm of operational excellence strategies within product development, the methodologies of design to value (DTV) and design to cost (DTC) hold particular importance. When properly integrated, these approaches enhance design quality, operational efficiency, and consequently, the company’s market competitiveness.
What is Design to Value (DtV) and What Purpose Does It Serve?
Design to value is an approach based on the analysis of the value perceived by the customer. The aim is to obtain a direct relationship between the requirements that the customer seeks and the product offered.
We purchase what meets our needs and evaluate the price based on several variables, including the product’s ability to fulfill those needs. The more its functions align with our requirements, the more perfect the match, and the more we perceive the price as appropriate.
Whether it’s a consumer product, a car, or industrial machinery, our choice is based on the value we, as customers, recognize in that specific product.
When is it useful to conduct a value investigation of your products? It’s always a good strategy for any company, especially critical when these warning bells sound:
- Intensified competition in the sector
- Emergence of new technologies (obsolescence)
- Rising costs and/or shrinking margins
- Decline in sales
- Significant or numerous complaints collected by customer care
And what about a new product?
That’s the best time for such an analysis, as it focuses efforts on what truly matters, saving time and money while increasing the chances of customer satisfaction and success.
The DTV Methodology: Seeking the Value that Justifies the Cost
The value of the product, as recognized and anticipated by the customer, must be clearly defined in detail. It can vary from one target group to another, encompassing dimensions such as specific technical features, tight delivery times, sustainability, design, etc.
An example.
Consider an automobile manufacturer planning to launch a city car. In this scenario, the value perceived by the customer may not lie so much in large trunk space or vehicle range but in compactness, ease of maneuverability, and access to restricted traffic zones. Therefore, DTV would focus the design on a vehicle suited to urban environments with scarce parking and significant speed limits (like 30 zones), favoring certain types of fuel over others. Aspects such as trunk capacity or acceleration performance, typical of larger cars suited for long distances, are not priorities for a city car user and would end up increasing costs without providing any special benefits.
Among these prioritized functions, which should be given precedence in terms of investment and production costs?
The sales network, the first point of contact with the customer, is best positioned to capture these needs and assist in their evaluation.
Indeed, value analysis, or design to value, emphasizes collaboration between design technicians and sales personnel as the first and crucial step in the process.
What is Design to Cost?
Design to cost is an approach that sets precise cost targets for each product function, ensuring that the overall budget is met without compromising performance and quality. This avoids excessive resources being spent on aspects which are not relevant to the end user.
For this methodology too, the initial critical step involves assembling a team from every phase involved in the product’s creation:
- Design department
- Industrialization department
- Purchasing office
- Shipping department
- Customer care
After defining and prioritizing the product’s functions through value analysis, DTC proceeds to break down each function into its specific subassemblies (components, labor hours, manufacturing techniques, etc.).
For each subassembly, the team defines a maximum acceptable cost.
This approach allows the company to allocate resources according to their importance for key functionalities.
An example.
In the design of a complex product like an electronic device, DTC might determine that the cooling system should not exceed 10% of the total production cost, thus balancing resources allocated to other essential and highly valued functionalities such as battery life or processor speed.
If these latter functions, to achieve high performance, require significant investment in their subassemblies (components, design and manufacturing hours), it means that for cooling, one must strive for alternative, new, and innovative solutions to achieve a functional result that supports good battery life and processor activity.
Synergies Between Design to Value and Design to Cost
While design to value ensures that every aspect of the product is oriented towards maximizing perceived value, design to cost ensures that each component meets its cost target. Their synergy allows for significant outcomes for the enterprise:
- Highly competitive products, both in terms of price and functionality
- Optimized costs without compromising on quality
From a methodological perspective, we can identify three key steps in the synergistic application of DTV and DTC.
1. Cross-departmental collaboration.
The collaboration between company departments (design, sales, purchasing, etc.) is essential for the effectiveness of these methodologies. Their strategic alignment ensures that customer needs are integrated from the beginning of product design and that costs are then precisely defined.
This step is as important as it is delicate, which is why it is advisable to entrust it to external consultants capable of organizing DTV and DTC processes. Being outside of the company dynamics, they can manage conflicts, resistances, and critical issues more effectively and straightforwardly.
2. Analysis of functions and value requirements.
In the first phase, the team composed of designers and sales personnel works to define a list of key functionalities, assigning priority to features that create the most value for the customer.
Returning to the city car example, functions like reduced consumption and minimal footprint will likely take precedence over power, luxury interiors, or large volumes.
3.Construction of the cost/function matrix
Based on the function analysis, a cost/function matrix is constructed that allows for targeted resource allocation. In this second phase, the team expands to include areas of the company involved in the final product realization (industrialization, purchasing, shipping, customer care, etc.), for a detailed analysis of the realization costs (subassemblies) related to each function. This translates into:
- Rationalization of chosen materials
- Optimization and simplification of manufacturing processes
- Searching for new solutions (where cost reduction is needed)
In the city car example, focus will be on the subassemblies of functions like reduced consumption and minimal footprint, i.e., vehicle materials, fuel, dimensions, etc. All elements (subassemblies) that make up and determine that function will be scrutinized, knowing that investment is necessary and justified.
Besides those explicitly recognized by the customer, there are usually functions (and related subassemblies) very important for design and overall product functionality: how are they evaluated? What priority is assigned?
The design team focuses particularly on these functions to find further economically sustainable solutions without impacting quality.
If you found the topic interesting and want to delve deeper into its practical application, in the case history A product development methodology to meet market needs you can explore the challenges faced and the method applied.
Roberto Malaguti – Partner at ŌdeXa
